China holds nearly $1.3 trillion in U.S. Treasury debt. Deborah Kan chats with the WSJ's Aaron Back about the risks of a default and the potential repercussions for China and the world.

This transcript has been automatically generated and may not be 100% accurate.

... the the ... the US to take necessary steps to bully defaulting on government debt and ever con joining me now is that he called ... in ... I see ... at a time as a major holder of the US the Treasury's how much exposure to say ... so of course the U S Treasury Department data ... China has ... roughly two short of one point three trillion dollars of U S Treasury debt ... now that data is in perfect it doesn't capture some ... Treasuries that ... China holds through third party vehicles around the world ... soprano understates somewhat ... demanded that I mean a lot of expense or so what would it mean really if the USD faults what it what what would it mean what implication would have on on time ... well it's obviously negative for China like any creditor China would prefer to be paid back ... in full and on time ... but I think the biggest impact on China from the U S defaults ... would actually be through China's Treasury holdings ... I think you have to be through economics ... so you know China holds these Treasuries but the discrete holding to maturity ... and a really cold for their investment value they told them ... as a side effect of their policy of controlling the exchange rate ... so ... your default is negative but the impacts are limited on their holdings of Treasuries think the real risk is that he could trigger a global recession ... could be ... a Lehman Brothers like moments if the U S defaults ... and that could cause global market chaos ... and this could get hurt global demand for Chinese ... products Chinese exports ... just as we saw ... during the great financial crisis so I think that's the real risk ... the peso a winger will we talk about I mean if if if there's like another Lehman like crisis and what of the global him implications ... dropped a bomb I mean this could be the beginning of the starting point for something a lot bigger ... Yemen assured Sir I'd you know it's it's hard to know ... but in my opinion it would basically be a disaster for everyone in the world ... the deal including China and everyone else so ... he obviously you export dependency Asian countries like Japan Taiwan Korea who are also was a Treasurys would all be impacted ... by things import to realize that ... actually more than half of the U S publicly held the ... national debt ... is domestic ... it's held by ordinary Americans ... is held by pension funds banks insurance companies things like this ... so there's a perception United States that ... we all this money to foreigners especially Asians of defaults ... you know ... will be jolting them ... really denied says Abheek ring itself ... with the default so I think is important not to miss the force for the treasonous and politicians certainly know that right ... a woman holds her cake thanks Fran